Gift Tax Exclusion

There are really two exclusions: the lifetime exclusion of $5,340,000 and the annual exclusion of $14,000. For example, you can give any number of $14,000 gifts to different individuals in a year and you would not affect your lifetime exclusion nor would you need to file a gift tax return form 709. If you give over $14,000 you reduce your lifetime exclusion and need a gift tax return prepared. For example, if you give a car costing $30,000 to your daughter in 2014, your reportable taxable gift would be $16,000 because you reduce the gift by the annual exclusion and your lifetime exclusion would then be $16,000 less. You would not owe a gift tax until you exceeded the lifetime exclusion amount. Taxable gifts also reduce your estate tax exclusion of $5,340,000 which equals the lifetime gift tax exclusion.